The buzz word is FHA – The conscience loan for Loan Officers.

Posted under Credit / Your Fico Score, How to buy a house, Mortgage Purchase Loans, Mortgage Refinance

The buzz word is FHA, Federal Housing Administration. 3% down towards a purchase of a home and like magic you are now approved to buy a home. What might surprise you is that it is not a new loan product by any standards. FHA has been around for a long time and one might consider it ‘the’ loan for the Loan Officer who has a conscience.

The sub-prime market of liar loans are falling by the way side. However there are still products out there that ask borrowers to just verify employment with a telephone call. The lenders are not asking to see paystubs or income taxes. I called a reputual bank (whose name I shall not devulge in this article) to ask this questions. The response I received was shocking!

The account executive informed me that they do not ask for paystubs or income taxes, they assume that the employment information provided by the Loan Officer on the form is correct. What the account executive actually meant is that they assume that the information provided is ‘the truth’.

So what about FHA loans and how can they help borrowers afford a home today. First of all federal legislation recently raised the FHA loan limits nationwide. Although this is just a temporary measure, FHA has opened the door for a large number of borrowers who need loans as high at $729,750.

The FHA does not lend money directly. It provides mortgage insurance (aka MI) to borrowers through private lenders. What this means to you is that the FHA is responsible for any defaulted loans.

Applying for an FHA loan is a long tedious process. Unlike sub-prime loans that slip through the cracks with no docs and stated income stated assets loans for example. FHA requires full documentation of income. Borrowers who can make at least a 3% down payment or have at least 3% equity in their homes can qualify for an FHA loan.

Written by Holly Leano – REALTOR and Sr Mortgage Consultant

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